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NEWS UPDATES Asean Affairs    29 June 2012

UK mining company hauls Indonesia to arbitration centre


Indonesian President Susilo Bambang Yudhoyono is telling his ministers to prepare for the worst after the government recently entered into arbitration with an international mining company.

During a Cabinet meeting yesterday, Yudhoyono told relevant ministers to take needed steps to prevent such arbitrations in the future, as the case had affected him personally as the head of state.

Yudhoyono was referring to an arbitration filed by London-listed Churchill Mining Plc. that was registered with the International Centre for Settlement of Investment Disputes (Icsid) in Washington, DC, on June 22.

"Please note that this case began at the regency level. But when it’s brought to arbitration, the President is the one who becomes the first defendant," the President said.
"Imagine if such cases happened in hundreds of regencies in the country, and the President was named the defendant," Yudhoyono said.

Churchill turned to arbitration after the Supreme Court rejected its appeal of a decision favouring East Kutai regency that was reached by the Samarinda Administrative Court in East Kalimantan.

The mining giant sought US$2 billion in compensation from the government for granting another firm the right to operate in Churchill’s concession.
"Don’t let us be on the losing or the wrong side, because the implications will be very large," Yudhoyono said.

"I do not want those multinational companies to do anything they desire with their international back-up and put pressure on developing countries such as Indonesia," he said.

"As long as we are sure that we are on the right path, the East Kutai regent [Isran Noor] must uphold the truth, justice and our pride. That’s the principle."
Yudhoyono assembled his Cabinet members for a one-hour meeting specifically to discuss the arbitration.

Coordinating Economic Minister Hatta Rajasa declined to discuss the results of the meeting. "Things are still underway. Let’s not talk too much about something that is still in process."

According to the Icsid’s website, the Indonesian government is represented by the Attorney General Basrief Arief.

In a statement released on Churchill’s website, chairman David Quinlivan said the Icsid had confirmed that it had jurisdiction to handle the dispute under the Bilateral Investment Treaty between the United Kingdom and Indonesia.

"The board of Churchill is pleased that the Icsid has registered the request for the arbitration, and that the arbitrary proceedings have been formally initiated.

Churchill will be seeking the full relief owed to it under the provisions of the bilateral treaty and under international law," Quinlivan said.

The case began in 2008 when Churchill started coal exploration in Kalimantan by acquiring a 75 per cent stake in a concession held by local firm Ridlatama Group.

However, the East Kutai regency administration later declared the mining concessions owned by Ridlatama invalid after it revoked the firm's mining permit.

The Churchill case is not the only dispute involving the government in international arbitration. The Icsid is considering another case filed by British national Rafat Ali Rivzi, a former shareholder of Bank Century, now Bank Mutiara.

Rivzi reportedly is seeking compensation for his losses stemming from the government’s 2008 decision to spend 6.76 trillion rupiah ($716.5 million) to bail out the ailing bank.

Rivzi was sentenced to 15 years’ imprisonment in absentia by an Indonesian court last year for his role risking the bank.

The government has taken international arbitration issues seriously after a case in 2000, when state oil and gas company PT Pertamina was ordered by the International Arbitration Institute in Switzerland to pay around $300 million to power company Karaha Bodas Company after the government annulled the contract due to the Asian financial crisis in 1997. Karaha Bodas was controlled by US-based Florida Power Energy LLC and Caithness Energy LLC.

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